Marijuana Dispensaries Becoming Exclusive Domain Of The 1 Percent

Posted on
June 28, 2013
by
News Admin

Once a business proposition that required little more than a few
thousand dollars and some gardening equipment, selling medical marijuana
is quickly becoming a dream fit only for deep-pocketed entrepreneurs.

Regulations in states that only recently legalized medical marijuana
are mandating that would-be dispensary operators set aside large amounts
of cash before even applying for a license, tipping the scales in favor
of businesspeople with money to burn. Drawn-out licensing processes
being devised in those states mean permits to run dispensaries will
likely only go to those able to afford a cadre of consultants and
lawyers.

Five years ago, Ean Seeb helped open Colorado dispensary Denver
Relief with “four thousand dollars and half a pound of cannabis.”

“I don’t think that would ever happen again,” said Seeb, who now
works as a dispensary consultant. “Somebody who just has a good idea but
little capital would find it difficult to impossible to go into the
business today.”

Seeb said he is counseling clients in Massachusetts, where only 35 dispensary licenses will be granted starting later this year,
to set aside at least $2 million before even considering going into the
medical marijuana industry. Not only are state fees related to the
permitting process likely to total over $100,000 for many dispensaries,
but the merit-based process for obtaining a license is also expected to
privilege those who can demonstrate they have excess cash to secure an
abundant supply of cannabis.

In Connecticut, where rules are yet to be finalized and the state has
only committed to allowing one dispensary, fees are expected to be
higher and competition to secure a cannabis producer’s license even
fiercer. Among other requirements, Connecticut will ask dispensary
owners to post a $2 million bond
that the state will be able to access if operations falter. Seeb is
telling clients there to make sure they have at least $6 million in the
bank before moving forward.

When it awarded 98 licenses
to open medical marijuana dispensaries 10 months ago, the state of
Arizona required applicants to show $150,000 in capital. The vast
majority of those getting into the business appeared to be well-heeled
entrepreneurs, according to interviews with license-holders and
consultants in the state. Owners of real estate firms, cellphone shops
and motorcycle dealerships, along with at least one college student with
a trust fund are now in line to become medical marijuana store owners,
the consultants said. None of the new licensees interviewed by The
Huffington Post had any experience running a health care venture, and at
least one was openly disdainful of marijuana as a business.

That
reality is in stark contrast to the situation in California and
Colorado a few years back, when dispensaries first became legal. The
free-wheeling business, devoid of regulation or store count limits, was
immediately dominated by marijuana insiders: former legalization
activists and growers with connections to the underground market. Now,
industry sources told HuffPost, the average ganjapreneur is likely to
have deep capital pools and a view on the bottom line, if little love
for cannabis as a plant.

“It’s just like anything else, it’s a business opportunity for me,”
said Thai Nguyen, who owns a real estate firm in Phoenix and is
partnering with his wife and one of his employees to open a store called
Herbal Wellness Center in central Phoenix. While those who set up
dispensaries in California and Colorado after the drug was first
legalized in those states were often activists with an open pride for
their product, Nguyen expressed concern about how being publicly
associated with the marijuana industry could affect his other
businesses.

Just a few miles away from Nguyen, a businessman whose previous
interests include a cellphone retail store and a cigar shop said he is
trying to open a dispensary in Chandler, Ariz., mainly as a profit
proposition.

“I’m a business owner,” Ramey Sweis, the businessman, said. “Between
me and my partners, we have maybe 20 to 30 businesses. We saw this as a
good avenue to expand as a business plan. Nothing more.”

State public records
show the owner, salesperson and service technician at Phoenix
motorcycle dealership Apache Motorcycles are among those who received a
license to set up a marijuana dispensary in the state. Randall and Rex
Webb, two Arizona businessmen with multiple ventures throughout the
state, are also listed as principals of a non-profit corporation attempting to secure a dispensary permit, public records show. Repeated calls for comment to those parties were not returned.

Industry sources described a sort of gold rush mentality for the newly legal industry.

"It’s just like seven years ago when everyone who could became a real
estate agent, and they owned a hair salon but they were also a loan
broker or whatever,” said Adam Bierman, whose firm The MedMen has helped
advise dozens of would-be dispensary owners in California, Colorado,
Arizona and Nevada. “It’s the same thing. People are piling in because
it’s the hottest industry right now.”

“It’s like the Super Bowl is coming to town,” he added.

Kris Krane, who said his firm 4Front Advisors has advised 32 clients
in six states on how to set up and operate medical marijuana
dispensaries, said there is a benefit to having people with plenty of
capital come into the industry.

“Professional-looking retailers have the ability to change public
perception,” Krane said. “The stereotype gets changed from the stoner
burnout selling weed from his parent’s basement when a beautiful,
high-end retailer that the community can be proud of opens up.”

A former activist with Students For Responsible Drug Policy and the
National Organization For The Reform Of Marijuana Laws, Krane said he
sees his current position as an extension of his previous work fighting
the so-called war on drugs.

“We move the movement forward by making sure the industry thrives,” Krane said.

But there are drawbacks, according to Bierman, the MedMen advisor.

“Some of the people that were getting in, these real estate
entrepreneurs who want to be pot tycoons, they don’t know what they’re
doing,” he said. “People in Arizona got a license and then called and
were like 'What do I do?' And I told them to buy a 25,000-square-foot
warehouse and fill it with marijuana. And they freaked out. They were
like ‘Oh my god, that’s illegal. I can’t do that. I can’t go to jail.'"

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